What typically determines the financeable amount in real estate transactions?

The financeable amount in real estate transactions is primarily determined by the appraised value of the property combined with the lender's loan-to-value (LTV) ratio. The appraisal provides an objective assessment of the property's worth, which is crucial for lenders when assessing the risk of the loan. The LTV ratio indicates the percentage of the property's value that the lender is willing to finance. For instance, if a property is appraised at $500,000 and the lender has a loan-to-value ratio of 80%, they would typically finance $400,000 of the property's value. This combination of appraisal and LTV forms the basis for determining how much financing a borrower can access, which is essential to the financing process in real estate transactions.

While the property’s rental income and expenses, market demand, and competition can influence property values and investment decisions, they do not directly define the financeable amount. The final selling price, although important in negotiations, may not necessarily reflect the appraised value or lender's financing criteria, thus further clarifying why the focus is on appraisal and LTV for financeable amounts.